2004 (5) TMI 188 - AT - Central Excise

Summary

Issues: Duty payment on job work manufacture, assessment basis, agency relationship determination

Duty Payment on Job Work Manufacture:
The appellant, engaged in manufacturing lubricating oil and greases, undertook job work for other parties. The dispute arose regarding duty payment on goods manufactured for job workers. The impugned orders held that duty should be assessed based on the depot sale price of the parties who provided the job work, without any deduction. This led to a duty demand of over Rs. 1.5 lakhs and a penalty of Rs. 10,000. The appellant contended that duty payment was in excess as they should only pay duty on the value at the end of processing, not based on the sale price of the parties selling the goods. The legal position, as per the decision in Ujagar Prints case and an order of the Tribunal in a previous appeal, supported the appellant's contention.

Assessment Basis:
The Tribunal analyzed the records and arguments, finding no sustainable basis for the lower authority's conclusion that the appellant acted as an agent of the parties providing job work. The appellant, being a limited company with its own manufacturing operations, was not deemed an agent based on returning processed goods under a stock transfer invoice or depositing duty amounts into their account by the parties ordering job work. The Tribunal emphasized that the goods were transferred under a stock transfer invoice after processing, not sold, and the duty liability was on the raw material supplier as per the agreement. The deposit for duty payment did not establish an agency relationship. The Tribunal reiterated that in job work manufacturing, the assessable value should include job work charges added to the value of materials supplied, not the sale price of the party selling the goods. Therefore, the duty demand based on the impermissible sale price basis was set aside, and the appeal was allowed.

Agency Relationship Determination:
The Tribunal clarified that the mere act of returning processed goods under a stock transfer invoice and depositing cash for duty payment did not establish an agency relationship between the appellant and the parties availing job work services. The contractual job work arrangement did not create an agency or related-party relationship between the parties. The Tribunal emphasized that job work contracts do not make the parties agents of each other, as established in previous legal precedents. The Tribunal's analysis focused on the nature of job work manufacturing contracts and the determination of assessable value, which should not be based on the sale price of the party selling the goods after processing.